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Three Utah companies are alleging a former court-appointed receiver improperly locked their doors and shuttered their profitable businesses after they were sued in U.S. District Court in Utah by the Federal Trade Commission.
A motion filed in federal court Monday asks a judge to grant the companies permission to sue Robb Evans & Associates, a Los Angeles- and Las Vegas-based firm that has been appointed the receiver 44 times when the FTC seeks to take over businesses that are allegedly engaged in fraudulent activities.
The FTC sued Apply Knowledge, Supplier Source and a host of other Utah companies and their officers in February of 2014. The regulatory agency alleged the companies "preyed on consumers," inducing them to pay thousands for coaching and other services by claiming there were substantial profits to be made by operating online businesses.
Now, Apply Knowledge, Supplier Source and eBusiness Support say Robb Evans failed to follow court orders in putting the enterprises out of business, "apparently preferring instead to serve the FTC, its long-standing meal ticket."Â
It's the second time a motion seeking permission to sue has been filed in the case, Lesley Hawes, an attorney for Robb Evans said.
"The first motion to sue the receiver was baseless and unsupported, and was withdrawn by Apply Knowledge in the face of the Receiver's detailed opposition to that motion," she said in an email to The Salt Lake Tribune. "This new motion is equally meritless and is inconsistent with facts and allegations made in the first motion and other filings in the case."
But attorney Jonathan Hafen, who represents the companies, said the second motion includes that eBusiness Support was shut down too, even though the court did not place it under control of the receiver.
"Our clients propose to allege that the former receiver shut down all three businesses without authority or proper investigation, destroying their value, which was substantial," Hafen said in an email.
In 2014, U.S. District Judge Dee Benson granted the FTC's request in the Apply Knowledge case for a temporary restraining order and for the appointment of Robb Evans & Associates as the receiver charged with taking over the companies and gathering and preserving their assets.
Later that year, however, Benson said he regretted granting the TRO and then declined to issue a preliminary injunction and dissolved the receivership.
In taking those actions, Benson said he had been misled by attorneys for the FTC and receiver.
"It strikes me this receiver was working far more for the FTC than it was for the court," Benson said, according to a hearing transcript.
The proposed lawsuit says that receiver offered no basis for asserting that all the businesses named in the lawsuit were a "common enterprise," a designation that allows it to seize the assets of all the companies involved, not just the main one. Robb Evans also shuttered the businesses without offering evidence that they were operating illegally and even though they were profitable, it says.
The proposed lawsuit asks for damages to be determined at a trial and for attorney fees and costs. Benson will have to rule in favor of the motion in order for the lawsuit to be officially filed.